Opportunities in Doing Business in China GSB

8/14/2019 Opportunities in Doing Business in China GSB

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Opportunities for Doing Business in ChinaOpportunities for Doing Business in ChinaOpportunities for Doing Business in ChinaOpportunities for Doing Business in China

It is Critically Important to have someoneIt is Critically Important to have someoneIt is Critically Important to have someoneIt is Critically Important to have someone

or some team on the ground on your side.or some team on the ground on your side.or some team on the ground on your side.or some team on the ground on your side.





Do Your Homework/Have a PresenceDo Your Homework/Have a PresenceDo Your Homework/Have a PresenceDo Your Homework/Have a Presence

In many respects doing business in China is not unlike doing

business anywhere else - Have a plan

- Do your homework

- Understand whether you have the resources to get the job

done, and if you don’t have the required skill sets

• Engage trusted third parties “on the ground” to make things

happen quickly and well.

- The occasional business trip will not get the job done

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Buy From ChinaBuy From ChinaBuy From ChinaBuy From China

What only large multinationals did over the past 15 years,smaller firms can benefit from China sourcing

Case Study

- X-Ray Equipment Company

• 200+ Print Assembly Sourced and Prototype delivered in 16weeks

• 15 sources evaluated; Two selected

• 30% cost savings delivered

But what this company missed was the chance to enter thedomestic Chinese market

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Typical US Company PitTypical US Company PitTypical US Company PitTypical US Company Pit- -- -FallsFallsFallsFalls

Found a source at a trade show or through an internet search

- What is the probability that a company finds the bestsupplier in this manner?

- Doing a more comprehensive supplier search results in abetter match

• Finding compatible supplier/buyer relationships includesconsidering if the volume offered by the buyer is sufficient toget the desired level of service from the supplier.

- Example of Brass Valve Company found on the net

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Not visiting or auditing a potential supplier

Performing supplier audits is very important to truly know what youare buying and from whom

- Plywood Buyer

In more cases than one would imagine suppliers move productionto new sites or other suppliers

- Cast and Machined Metal parts for heavy equipment

While there are a number of articles in the press about poorChinese quality, it is possible to find world class suppliers inChina

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Supplier Audits and UtilizingSupplier Audits and UtilizingSupplier Audits and UtilizingSupplier Audits and Utilizing3333rdrdrdrd Party Consultants Produce ResultsParty Consultants Produce ResultsParty Consultants Produce ResultsParty Consultants Produce Results

1-5月 6月 7月 8月 9月 1-5月 6月 7月 8月 9月

Φ195+0.072

0 No record 0.1% 0.1% 0.0% 0.0% 53% 0.0% 0.0% 0.0% 0.0%

Φ48+0.025

0 No record 2.7% 2.7% 0.6% 0.0% 47% 0.0% 0.0% 0.0% 0.0%Φ62

+0.0300 No record 0.0% 0.0% 0.0% 0.0% 9% 0.0% 0.0% 0.0% 0.0%

Φ70+0.046

0 No record 0.0% 0.0% 0.0% 0.0% 9% 0.0% 0.0% 0.0% 0.0%

◎Φ62对Φ100No record 0.0% 0.0% 0.0% 0.0% 17% 0.0% 0.0% 10.0% 0.0%

◎Φ195对Φ100 No record 0.0% 0.0% 0.4% 0.0% 2% 0.0% 0.0% 0.0% 0.0%

◎Φ70对Φ62 No record 0.0% 0.0% 0.0% 0.0% 0% 0.0% 0.0% 0.0% 0.0%

特性Production defect rate Final release parts defect rate

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Assuming things are the same

- Typically labor and overhead are 70% of US costs with thebalance being materials, where as in China material isoften 70% of cost, with labor and overhead being muchless a factor

• Even with some wage inflation occurring in China, there is

still no comparison. A 10% increase on a $1/hour is stillonly $0.10

- Profit margins of Chinese suppliers are also typically muchless then in the West

- Many times there are multiple layers of agents in thesupply chain; going direct can save significantly

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Know the Market RequirementsKnow the Market RequirementsKnow the Market RequirementsKnow the Market Requirements

Neatly “soldier” your duck necks, otherwise your

“superior” product will be poorly regarded

Package appropriately

Many times Chinese packaging is superior to US

packaging, partially driven by lower costs which allow

better packaging to be used.

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Know Your ClientsKnow Your ClientsKnow Your ClientsKnow Your Clients

As will be discussed in more detail by Louise, it pays to

do due diligence on potential clients.

Case of an Indiana Stamping company receiving a

$1M+ order from a firm found to be operating out ofa temporary office

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Partner With and/orPartner With and/orPartner With and/orPartner With and/orHave a Direct Presence in ChinaHave a Direct Presence in ChinaHave a Direct Presence in ChinaHave a Direct Presence in China

Case Study

Orthopedic Products Company

- Did due diligence to understand market and competition

- Started sourcing product for export cost savings

- Saw opportunity to establish a presence in China to address

fast growing medical market

- After coming close to a JV, decided to start a Wholly-Owned

operation in order to have more control

- Took only 5 months to establish a Wholly-owned presence

▪ Could not have happened without a team on the ground

supporting full-time

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SummarySummarySummarySummary

China is a land of many opportunities; as in all markets there

are risks, knowing how to mitigate these risks is a keysuccess factor

What once large companies could only do, smaller and mid-size firms are doing and doing well

Do not consider China as only a low cost source, althoughthat remains an advantage; China is an attractive marketfor sales and business growth

Leveraging experienced on-the-ground resources saves time,mistakes and money

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Documents

Opportunities in Doing Business in China GSB